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Commodities Briefing 20.Mar 2014

Posted on 20 March 2014 by VRS |  Email |Print

J.P. Morgan Chase & Co. has become the latest bank to scale back its commodities business, striking a deal to sell its physical assets and trading arm to Swiss trader Mercuria Energy Group Ltd. for $3.5 billion in cash.
The deal, expected to be completed in the third quarter, marks the largest ever acquisition completed by Mercuria, a closely held company founded in 2004 by Swiss traders Marco Dunand and Daniel Jaeggi that is relatively unknown outside the physical commodities trading industry………………………………………..Full Article: Source

Posted on 20 March 2014 by VRS |  Email |Print

Banking powerhouse JPMorgan Chase & Co. has agreed to sell its commodities business to giant Swiss commodities house Mercuria Energy Group Ltd., reports the Wall Street Journal.
JPMorgan, the biggest U.S. bank by assets, initially valued its commodities unit at $3.3 billion back in October 2013, when it first warmed to a potential sale. Terms of the deal with Mercuria aren’t yet public, though the deal could be done by summer, according to sources cited by the Journal………………………………………..Full Article: Source

Posted on 20 March 2014 by VRS |  Email |Print

J.P. Morgan Chase & Co.’s decision to sell its commodities trading unit ends a chapter of anything-goes banking that dominated the 2000s after the so-called financial modernization laws passed a little over a decade ago.
The bank on Wednesday said it agreed to sell the unit for $3.5 billion cash to Mercuria Energy Group Ltd., the Swiss trading giant. J.P. Morgan’s move follows similar sales or shuttering of commodities units by Deutsche Bank AG , Goldman Sachs Group Inc. and Morgan Stanley to name a few. Exiting what amounted to a more-than-a-decade experiment in the nation’s banking system wasn’t without costs………………………………………..Full Article: Source

Posted on 20 March 2014 by VRS |  Email |Print

A gradual unwinding of Chinese commodity finance deals - which have attracted as much as an estimated $US160 billion in ‘hot money’ - is likely to weigh on prices of the diverse range of commodities used as collateral.
The use of commodities such as gold, copper and iron ore, but also soybeans and rubber, as collateral for loans has become widespread over the past year in China, where tightly controlled lending policies restrict the amount of money that can be borrowed………………………………………..Full Article: Source

Posted on 20 March 2014 by VRS |  Email |Print

China’s stockpiles of iron ore won’t hurt Australian miners, ratings agency Fitch predicts. “The fundamentals underpinning China’s demand for key commodities from Australia remain unchanged,” Fitch wrote on its website this week.
Australian iron ore miners have been struggling with negative market sentiment as iron ore inventory at China’s major ports reached a two-year high, hitting 105 million tonnes as of March 7, 2014. Lower GDP forecasts in China and weak commodity prices have contributed to uncertainty among coal and copper miners as well. China is Australia’s biggest customer for these commodities………………………………………..Full Article: Source

Posted on 20 March 2014 by VRS |  Email |Print

After a decade of volatile prices, the past three years saw an unusual period of stability in the oil market, with a barrel of crude oil averaging $110 each year. However, forecasts for 2014 predict a decline to an average of $105, on the basis of expanding supply and a weaker-than-expected demand.
A combination of geopolitical events in Syria, Libya and Nigeria have prevented oversupply despite the expanding entry of US shale oil into the market. The price has remained high thus far, but how long can prices stay above $100?……………………………………….Full Article: Source

Posted on 20 March 2014 by VRS |  Email |Print

Market interference by petro states spurred the energy revolution led by fracking, according to the head of commodities research for Citigroup—and that revolution is bound to spread around the world.
As it spreads, governments will find it more difficult to interfere in energy markets, said Edward L. Morse, the managing director and global head of commodities for Citi. “The irony is that what we see unfolding is a return to market forces,” Morse said during a recent panel discussion in Chicago, “an erosion of the ability of countries to use oil or natural gas as an instrument of foreign policy.”……………………………………….Full Article: Source

Posted on 20 March 2014 by VRS |  Email |Print

Concerns about potential disruption to Russian energy exports initially caused oil and natural gas prices to rise as the crisis in Ukraine unfolded, and they may yet do so again. But global energy prices could eventually end up lower than otherwise if tensions escalate, according to Julian Jessop Chief Global Economist at Capital Economics.
Indeed, the balance of power increasingly favours the West over Russia in the energy sector, just as it long has in finance. In short, Russia is of course a major producer and exporter of both oil and natural gas. Russia exports more than 7 million barrels per day (bpd) of oil and oil products (fuel oil and diesel), representing around 8% of global consumption………………………………………..Full Article: Source

Posted on 20 March 2014 by VRS |  Email |Print

The British government is pushing EU leaders to back a new energy security plan to wean Europe off Russian energy over the next 25 years by ramping up imports from new sources, including shale gas from the US and natural gas from Iraq.
The proposal, distributed to European capitals ahead of a summit in Brussels beginning on Thursday, also calls for speeding up development of a pipeline route through Azerbaijan and Turkey that would bring gas to Europe from the Caspian Sea, avoiding Russian territory………………………………………..Full Article: Source

Posted on 20 March 2014 by VRS |  Email |Print

German bank says that turmoil in Ukraine and a return of ETFs will push gold prices even higher in 2014. Gold prices will hit $1,400 (£842) an ounce by the end of the year in a dramatic turnaround in sentiment among investors buying the precious metal, according to Commerzbank.
The German bank said it has been “surprised by the early timing and scale of the upward movement” in the price of gold, which has risen 15pc this year………………………………………..Full Article: Source

Posted on 20 March 2014 by VRS |  Email |Print

Gold is likely to give up some of its recent gains but then recover again into year end, averaging $1,400 an ounce in the fourth quarter, Commerzbank said in a forecast released Wednesday. Silver is seen averaging $24 in the final three months of the year. Other fourth-quarter forecasts included platinum, $1,600; and palladium, $825.
Spot gold rose to just above $1,392 an ounce early this week and was up some 15% for the year to date, the bank said. The metal also was up around 13% in euro terms……………………………………….Full Article: Source

Posted on 20 March 2014 by VRS |  Email |Print

Gold is staging a breakout of a powerful technical pattern that will bring $1500/oz. into reach. Buying pressure has been building for physical gold. Price action is reflecting stronger bullish sentiment and a continuation of the long term bull trend, which dates back to 2009. Technical indicators show that gold is now poised for another strong move to the upside.
We know that gold trades differently than other commodities and differently than stocks. Some successful investors, such as Warren Buffet, steer clear of gold because it’s value cannot be easily calculated by some discounted cash flow or other quantitative method………………………………………..Full Article: Source

Posted on 20 March 2014 by VRS |  Email |Print

Goldminers are rapidly making use of the funding window that has opened up thanks to the recent rise in the gold price. Indochine Mining is the latest, seeking $20 million at a hefty premium to its share price. It launched the raising late last week and by Wednesday had $15 million. It expects to raise the rest in the next few days.
The raising comes as Kingsgate Consolidated seeks $60 million at a discount of 30 per cent to its share price. Doray Minerals raised $17 million last month, Silver Lake $40 million, Perseus $30 million and Saracen $60 million………………………………………..Full Article: Source

Posted on 20 March 2014 by VRS |  Email |Print

Gold’s outperformance almost seems counter-intuitive. After all, one of the biggest arguments that gold bugs have presented is that the Fed’s quantitative easing program is resulting in more fiat money circulating throughout the economy, leading to inflation. Gold is often used as a hedge against inflation.
Therefore, we would expect the price of gold to fall as quantitative easing comes to a close. But, that hasn’t happened. Instead, the fundamentals for the yellow metal have taken over as demand for it has surged. ……………………………………….Full Article: Source

Posted on 20 March 2014 by VRS |  Email |Print

The gold price rally is not the result of any geopolitical instability, instead should be considered as the beginning of the next leg of up move, says Peter Schiff, CEO, SEC registered investment advisor Euro Pacific Capital Inc.
According to Schiff, the precious metal is poised for a tremendous rally here on. The sharp decline in prices during 2013 must be treated as part of the ongoing bull market, he added………………………………………..Full Article: Source

Posted on 20 March 2014 by VRS |  Email |Print

Exchange traded commodities (ETCs) issue debt securities that trade on exchange offering investors direct exposure to commodities. By investing in ETCs, a spokesman for iShares says investors gain the desired exposure without the need to trade physical commodities or commodity futures contracts.
An ETC can be either physically backed, or derivative-based. In the first case, a spokesman for iShares says physical ETCs will seek to track the daily movement of the spot price of the relevant commodity by holding and valuing the physical commodity………………………………………..Full Article: Source

Posted on 20 March 2014 by VRS |  Email |Print

The slide in the yuan to near one-year lows has left it at critical levels for holders of an offshore derivatives product, exposing them to heavy losses that may fuel a further slide in the currency.
The yuan’s 0.8 percent drop in the three days since the central bank widened its daily trading band has rippled into the offshore market where billions of dollars of leveraged bets were sold to Chinese companies………………………………………..Full Article: Source

Posted on 20 March 2014 by VRS |  Email |Print

Latin American nations are looking ahead at a period of weaker regional currencies, while the widespread growth model based on commodities exports is nearing a “plateau”, an International Monetary Fund official said on Wednesday.
Cooling economic growth, rising international interest rates and softer commodities prices have combined to pressure currencies in recent months………………………………………..Full Article: Source

Posted on 20 March 2014 by VRS |  Email |Print

CoinDesk is attempting to define Bitcoin so everyone is on the same page going forward about this five year-old Internet phenomenon. It is compared to virtual currency, digital and crypto-currency.
The Department of Treasury in 2013 defined virtual currency as a currency or virtual money as a ‘a medium of exchange that operates like a currency in some environments, but does not have all the attributes of real currency.’……………………………………….Full Article: Source

Posted on 20 March 2014 by VRS |  Email |Print

The Chinese city of Shanghai will reduce the energy intensity of its economy by 3 percent this year through shifting from coal to natural gas and limit the growth of carbon dioxide emissions to 8.5 million tonnes, the city government said.
The city said in an energy-saving and climate-change plan for 2014 that it would curb growth in year-on-year energy consumption to 4 million tonnes of standard coal equivalent, keeping it on track to meet a total consumption cap in 2015 of 34.64 million tonnes………………………………………..Full Article: Source

Posted on 20 March 2014 by VRS |  Email |Print

The European Union should consider granting more free carbon allowances to most efficient energy-intensive companies and exclude such permits from trading, according to the EU steel industry lobby Eurofer.
The 28-nation bloc must base the allocation of greenhouse-gas quotas to manufacturers on less stringent emissions benchmarks to keep its industry competitive amid widening energy price gaps with the U.S. and Japan, Eurofer Director General Gordon Moffat said………………………………………..Full Article: Source

Posted on 20 March 2014 by VRS |  Email |Print

Everyday we generate enormous amounts of data through transactions in commodity markets. There have been many estimates of the quantity of data generated, the great hype of Big Data in 2014, and how firms should be investing in this area.
I want to take you through the example below and elaborate my perspective on Big Data in relation to commodity markets. Example: Let us consider the case of ethanol production, merchandising, and consumption. Ethanol can be produced petro-chemically or from agricultural feedstock, such as sugar or corn. The decision to produce ethanol is determined by two factors – revenues and costs of the ethanol business………………………………………..Full Article: Source

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